(Adds updated yield figures)
By David Randall
NEW YORK, July 3 (Reuters) - Record low bond yields in Europe and the expectation of further interest rate cuts by central banks worldwide helped push global stock market indices higher Wednesday as the benchmark U.S. S&P 500 hit another record high.
European Union leaders’ nomination of Christine Lagarde, the head of the International Monetary Fund, to replace Mario Draghi as president of the European Central Bank reinforced expectations of more monetary policy easing if it is needed.
Traders greeted the decision by sinking German 10-year Bund yields to record lows of minus 39 basis points, lowering Italian two-year yields back into negative territory for first time in over a year and lifting stocks worldwide.
The yield on 10-year UK gilts fell 4 basis points to 0.687% , which left it below the Bank of England’s main policy rate for the first time in a decade. U.S. Treasury yields slumped to their lowest since late 2016.
“We have already seen some weak data in recent weeks, so that is the backdrop,” said Elwin de Groot, head of macro strategy at Rabobank. “And now have Christine Lagarde as the likely successor of Mr Draghi at the ECB, which for the market says that the dovish policies will continue.”
On Wall Street, the Dow Jones Industrial Average rose 61.4 points, or 0.23%, to 26,848.08, the S&P 500 gained 8.39 points, or 0.28%, to 2,981.4 and the Nasdaq Composite added 23.09 points, or 0.28%, to 8,132.18.
MSCI’s gauge of stocks across the globe gained 0.26%, following broad equity gains in Europe.
Investors continued to seek out the safe haven of bonds due to concerns of slowing global growth after data showed Britain’s economy apparently shrank in the second quarter. Benchmark 10-year notes last rose 5/32 in price to yield 1.9601%, from 1.977% late on Tuesday.
“The latest downturn has followed a gradual deterioration in demand over the past year as Brexit-related uncertainty has increasingly exacerbated the impact of a broader global economic slowdown,” Chris Williamson, chief business economist at IHS Markit, said of the Britain reading.
In the currency markets, the pound flirted with two-week lows and stood at $1.2568, on course for its fifth drop in the past six sessions.
Oil prices also rose after data showed U.S. crude stockpiles fell more than expected last week. They remained wobbly, however, after falling more than 4% on Tuesday, even after OPEC and allies including Russia agreed to extend supply cuts.
Brent crude futures rose 0.7% to $62.85 per barrel. U.S. West Texas Intermediate crude futures gained 0.6% to $56.56 a barrel after dropping 4.8% the day before.
Reporting by David Randall; Editing by Will Dunham